Nothing is official, but many analysts are projecting that there will be no Cost-Of-Living Adjustment (COLA) for Social Security beneficiaries in 2021. No official decision will be made on this until the last quarter of 2020, but John Wasik, a journalist with Forbes who focuses on investing, issued a recent article indicating that most projections show no COLA increase this year.
As Wasik points out, Social Security’s COLA is tied to the Consumer Price Index (CPI). He reported that the CPI actually fell in April of 2020, which is rare and not a good sign for any COLA increase chances. The main reason the CPI fell is the same reason unemployment numbers have surged resulting in an economic recession, the COVID-19 pandemic. Millions of Americans followed stay-at-home orders issued by the country’s governors, which resulted in lower consumer demand and falling prices. Oil prices in particular fell sharply according to Mary Johnson a Social Security policy expert. Below is a portion of Wasik’s article below.
“The recent unprecedented plunge in oil prices have all but wiped out the prospect of a Social Security cost-of-living adjustment (COLA) for next year,” says Mary Johnson, a Social Security policy analyst for the Senior Citizens League with an extraordinary track record of accurately predicting the next year’s COLA.
This all sounds like bad news. Everyone expects some sort of COLA increase from year-to-year to keep up with inflation, but when inflation is extremely low could there actually be a benefit of no COLA increase in 2021? Wasik thinks where may possibly be.
He points out that when inflation drops consumers get more for their money, which resulted in a 3 percent gain in buying power for Americans in 2020 compared to 2019. Social Security’s COLA increases recently have rarely been 3 percent or higher, so no COLA increase may actually not be the worst thing in the world for Social Security beneficiaries in 2021 as hard is that may be to believe for some.
